Nearly every chief executive and chief financial officer that Ian Hannam had worked with in the previous 20 years turned up for his leaving drinks last summer, according to attendees. The standard speech was delivered not by a JP Morgan colleague, but by Mick Davis, chief executive of mining giant Xstrata and a long-time client.

Hannam: left JP Morgan to fight a fine levied by the City watchdog for market abuse

Hannam was leaving to fight a fine levied by the Financial Services Authority for market abuse relating to client Heritage Oil. At the time, Davis, Martin Gilbert of Aberdeen Asset Management, and David Davis, the former Tory leadership candidate, all spoke out in support of him. And, given his standing in the market, few expected the JP Morgan banker and former captain in the British Territorial Army to be out of the game for long. Indeed, his exit set off a spate of speculation as to what the so-called “King of Mining M&A” might do next, and which of a cadre of former colleagues might be involved. If the past is any guide, the group is unlikely to disappoint.

One lawyer familiar with the group said: “They will have something up their sleeves. When something happens in the sector, chief executives will still be calling the same people they always did. It is just that they’ll be calling mobile phones, rather than fixed lines.”

-- Strong connections

The cadre of colleagues are a tight-knit group with overlapping interests spanning a spider’s web of mining projects from Central Asia to West Africa.

The group is largely a diaspora from Flemings and JP Morgan, and includes names such as Michael Haworth, Lloyd Pengilly and Neil Passmore. Lord Robin Renwick, who remains a vice-chairman of European investment banking at JP Morgan, is also involved, as is Poland’s richest man, Jan Kulczyk, and Clifford Elphick, founder and chief executive of Gem Diamonds.

Those with knowledge of the group’s business interests are at pains to stress there is nothing untoward about any of the relationships detailed in this article. They point out that investments, often small, were signed off by JP Morgan compliance where relevant, and that the vehicles, such as those launched by Haworth, and more recently Pengilly and Hannam, are private firms and undeserving of such scrutiny.

However, the group, and their investments, highlight how interconnected the extractive industries are. Even those who work in it describe it as “incestuous” and a hotbed for “gossip and intrigue”. The business connections also illustrate the close-knit relationships of ex-military personnel, who draw on their knowledge and training to develop natural resources in some of the most inhospitable and potentially hostile areas of the world.

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One banker who knows the group said: “What you tend to find in natural resources is that while the projects change, the individuals behind them don’t. The group of people with the in-country expertise, the technical expertise and the access to capital required to get a project off the ground is inevitably pretty small.

“The City of London is full of these little networks – where you’re able to draw a Venn diagram connecting them all. But this lot are a case study.”

Hannam and Kulczyk declined to comment for this article. Haworth and Passmore did not respond to messages seeking comment.

-- Spider’s web

Haworth, a one-time head of metals and mining corporate finance in London at JP Morgan, left the US bank in early 2006 , becoming one of three founding directors at Strata Capital UK LLP in March that year. A year later, the firm was named as financial adviser to Gem Diamonds (which had been floated a few months earlier by Hannam and Passmore) on its $80m acquisition of BDI Mining.

Strata’s shareholders are a who’s who of metals and mining advisory bankers. Lord Renwick, a former ambassador to South Africa and the US, deputy chairman of Fleming Family and Partners, and a board director at Bumi, owns a stake, according to the House of Lords register of interests.

Hannam also has a small passive shareholding, while Pengilly, who left JP Morgan in August last year to set up QKR Corporation Management (UK) with a former colleague, has an indirect shareholding through a family trust. Jan Kulczyk’s Kulczyk Investments invested in 2008 and now holds a 15.4% stake.

Strata has two principal holdings. The first is in London-listed Zanaga Iron Ore, which manages and develops an iron ore facility near Brazzaville in the Republic of Congo.

Zanaga was launched by Elphick, who led the team that initially applied for the exclusive exploration permit on the Zanaga mine. Strata was later invited to become a shareholder in the project.

In 2009, Xstrata acquired a call option to buy a 50% plus one share majority stake in the Zanaga project for $50m. This money was used to fund a pre-feasibility study at the facility. A year later, in 2010, it paid an additional $56m to extend the option, with the firm listing that year and raising £62.1m. Garbet and Guava Minerals were the selling shareholders, and the duo retain 41.25% and 31.64% stakes in the firm respectively.

-- Powerful network

Haworth, who is a non-executive director at Zanaga, is a director at Garbet, while Elphick, who is non-executive chairman, is a potential beneficiary of a discretionary trust that is a shareholder in Guava Minerals.

In 2011, mining giant Xstrata announced it had elected to exercise the call option over Jumelles, a British Virgin Islands-registered subsidiary of Zanaga in which Strata had a shareholding, and which, through its subsidiary MPD Congo, owns the Zanaga project. Under the terms of the deal, Xstrata acquired a 50% plus one share interest in Jumelles in return for a commitment to fund a feasibility study to a minimum of $100m.

Xstrata has the option to buy out Zanaga completely early next year. The head of corporate development at Zanaga, who led on the deal, is Andrew Trahar, previously a banker at JP Morgan. Trahar did not return messages requesting comment.

Strata’s second significant interest is a 45% stake in Ncondezi Coal Company, currently exploring and developing coal exploration licences in the Tete Province of Mozambique. It too listed in 2010.
Haworth is the company’s non-executive chairman. Hanno Pengilly, a former natural resources banker at JP Morgan in South Africa and the son of Lloyd, is leading the company’s search for a strategic partner. Pengilly did not return messages seeking comment.

Michael Rawlinson, another former JP Morgan Cazenove banker who famously helped mid-cap broker Liberum win a role on Glencore’s giant initial public offering in 2011, is lead corporate broker to Gem Diamonds, Zanaga and Ncondezi. Rawlinson declined to comment.

Another Kulczyk investment is Ophir Energy, the London-listed oil and gas exploration company, in which it has a 10.2% stake. Formed in February 2004, Ophir struck an early agreement with South Africa black economic empowerment investment group Mvelaphanda Holdings, acquiring its assets in the Berbera Block in Somaliland.

Merlin Partners, founded by former Robert Fleming & Co banker Matthew Clarke, later worked on equity raises for the firm, while in 2008 Passmore at JP Morgan helped the company raise capital in a private placement. This led to Mittal Investments becoming the firm’s largest shareholder, followed by Mvelaphanda and hedge fund Och-Ziff. Passmore subsequently worked on the company’s $385m initial public offering, and its $170m acquisition of Dominion Petroleum in 2012.

-- Afghanistan investment

Kulczyk Investments also has a 28% stake in Centar, a company exploring for gold in Afghanistan established by Hannam. Investors in the company include Joshua Fink, the son of Blackrock founder Larry, according to a 2011 article in Fortune. Peter Hambro, the founder of the Russian mining company now known as Petropavlovsk, is also an investor, according to the article. JP Morgan is corporate broker to Petropavlovsk.

Centar’s first investment in Afghanistan was a 45% share in Afghan Gold & Minerals Co, which has been described as the first Afghan exploration and production company with an international shareholding. A 2010 report by the Pentagon estimated that there may be $1 trillion worth of undeveloped mineral wealth in Afghanistan.

Afghan Gold & Minerals, which is 51% owned by English-educated local businessman Sadat Naderi, has a gold licence in Qara Zaghan just north of Kabul, and at the end of last year was named as preferred bidder by the country’s ministry of mines for a copper exploration licence in Sar-I-Pul and Balkh in the north of the country. The company also holds a 49% stake in TMAC, a joint venture backed by Yildizlar, Turkey’s largest mining company, which has been declared preferred bidder for a gold exploration licence in the country.

Afghan Gold & Minerals is headed by Richard Williams, a friend of Hannam’s and a former commanding officer of 22 SAS Regiment, who features in Task Force Black, a book by Mark Urban detailing the SAS’s “secret war in Iraq”.

Williams, who also sits on the board of Elphick’s Gem Diamonds, is one of three directors at Centar Technical Services (UK), a 100% owned subsidiary of Centar established in 2010, along with Jaroslaw Paczek, a representative of Kulczyk, and Clarke of advisory boutique Merlin Partners. Williams and Clarke did not return messages seeking comment.

--This article first appeared in the print edition of Financial News dated February, 18, 2013